Good afternoon, ladies and gentlemen, and welcome to the Second Quarter 2022 Earnings Conference Call for Organogenesis Holdings Inc. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly. Before we begin, I would like to remind everyone that our remarks today may be containing forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including Item 1A risk factors of the company's most recent annual report. You are cautioned not to place any undue reliance upon any forward-looking statements, which speak only as of the date made. Although it may voluntarily do so from time-to-time, the company undertakes no commitment to update or revise the forward-looking statements whether as a result of new information, future events or otherwise except as required by applicable securities laws. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website. I would now like to turn the call over to Mr. Gary S. Gillheeney, Sr., Organogenesis Holdings' President and Chief Executive Officer. Please go ahead, sir.

Thank you, operator and welcome everyone to Organogenesis Holdings, Inc's second quarter 2022 earnings conference call. I'm joined on the call today by Dave Francisco, our Chief Financial Officer. Let me start with a brief agenda of what we'll be covering during our prepared remarks. I'll start with a high level review of our second quarter revenue results and some recent operating highlights. After my opening remarks, Dave will provide you with a more in-depth review of our second quarter financial results, our balance sheet and financial condition at the end of the second quarter and the guidance for 2022 that we updated in today's press release. Then we'll open up the call for questions. Beginning with the review of the results for Q2, we reported net revenue of $121.4 million, a decrease of 1% year-over-year, driven by a 2% growth in our sales of our advanced wound care products and a 35% decrease in the sale of our surgical and sports medicine products. As expected, the decline in surgical and sports medicine reflects the suspension of commercialization of our ReNu and NuCel products following the expiration of the FDA enforcement grace period last year. Excluding net revenue from these products, net revenue increased 3% year-over-year on an adjusted basis. Second quarter sales results came in at the midpoint of the growth expectation range we provided on our first quarter call. However, our GAAP revenue results included a $1.6 million GPO settlement in the period. Dave will review the details of this settlement in a few moments. But I wanted to call out that excluding this impact, our sales on an operational basis were approximately $123 million in Q2 at the high-end of the growth expectation range we provided in our first quarter call. As expected, we experienced an improvement…

Thank you, Gary. I'll begin with a review of our second quarter financial results. Unless otherwise specified, all growth rates referenced during my prepared remarks are on a year-over-year basis. Net revenue for the second quarter of 2022 was $121.4 million, down 1%, and excluding ReNu and NuCel, we grew adjusted net revenue by 3%. As Gary mentioned, net revenue included a $1.6 million impact related to a GPO settlement. In August of 2022, the Company reached an agreement with one of its GPO’s to settle previously disputed GPO fees for $3.3 million. This settlement was included in the GPO fees as a direct reduction of revenue. The company recorded $1.6 million of the settlement fees during the three months ended June 30th, 2022 and has revised its previously issued historical financial statements to include a reduction of $1 million in the three months ended March 31st, 2022 and a reduction of $0.7 million in the three months ended December 31st, 2021, as reflected in the Company's form 10-Q filed with the SEC today. Importantly, we remain in good standing with this GPO partner and have recently renewed our contract. We look forward to continued growth and partnership with them in the years to come. Turning back to review of our Q2 results. Our Advanced Wound Care net revenue for the second quarter of 2022 was $113.8 million, up 2% year-over-year. Net revenue from Surgical and Sports Medicine products for the second quarter of 2022 was $7.6 million, down 35% driven by the suspension of marketing of our ReNu and NuCel products in connection with the expiration of the FDA's enforcement grace period on May 31st, 2021. Excluding sales of ReNu and NuCel in the period, net revenue from Surgical and Sports Medicine products increased 13% year-over-year in Q2. Net…

Thank you, sir. One moment for our first question and that will come from the line of Steve Lichtman with Oppenheimer. Please go ahead.

Thank you. Hi, guys. Just wanted to touch on the amniotic competition that you mentioned. Can you talk a little bit more about what you're seeing, in what types of areas you're seeing it? And what gives you the confidence that it is transient or will be transient?

Sure, Steve. So what we've seen is more of the smaller players in the space that mostly amniotic products and those products are competing with our products, competing for share of voice and we just see a lot more of them. I think the transient component of it is with no published ASPs that competition could continue, particularly in the office. So we think over time, those smaller players will not be as competitive going forward.

Okay and then just -- I wanted to ask on the proposed professional fee changes in the Wound Care space. What type of impact would those have on the business if they are finalized?

So we are aware of the July 7 proposal and it is the proposal, it's complicated. So we are working with our outside advisors to assess it at this point. We really don't have an assessment at this point. We don't know what will get finalized and we really can't assess the impact of it right now and certainly don't want to speculate all of the potential changes that could come out.

Okay. Thanks, Gary. I'll jump back in queue.

Thank you. One moment for our next question, that will come from the line of Ryan Zimmerman with BTIG.

Hey, Thanks for taking my questions. And I just want to follow-up on a couple of things. So -- and I apologize, I was juggling calls this evening. So if I missed this, I apologize, Gary, but if you just -- I understand some of the competitive dynamics in amniotics impacted the quarter, but can you just elaborate on, kind of, what drove such a significant jump in PuraPly sales in the quarter? And then I have a couple of follow-ups. Thank you.

Sure, I'll start and Dave, you can jump in. So, PuraPly play did well in Q1 and continue to do well in Q2. Our expectation is we would have a published ASP in Q3 from PuraPly, that did not happen and we had built in a pause in June as you normally would see at the end of the quarter once there is an announced public rate. So we didn't have that pause and that contributed -- obviously contributed to the quarterly revenue. Dave?

Yes. No I think, Gary, you have seen this -- Ryan over the last several quarters too, I mean it's obviously, it's a very well established brand, it's very differentiated with the antimicrobial component. And so, when we get the other items going on in the portfolio, obviously, we will lean on that PuraPly to some extent to share voice of the sales force and it works out quite well. So were pleased to see it up 84% in the quarter.

And just a follow-up on that, Gary and Dave. I mnea, you have talked about kind of a new SKU for PuraPly in the second half of the year that could have a negative impact on PuraPly adoption in the back half of the year. Given that the pricing impact hasn't come through yet, is it still your plans to introduce new SKUs around PuraPly?

Yes, we do plan later in the year to launch those products. They won't have a significant contribution this year at all. But we need to get them in the market and get them established, so we will, that is our current plan.

Okay. And then again, following up on some of the pricing questions and appreciate that pricing was largely stable in the second quarter and really in the third quarter as the third quarter rates were released, with that dynamic said though, Dermagraft and Apigraft, really more so Dermagraft I should say was down a bit and I believe that you've transitioned a lot of the usage away from Dermagraft as you reset up, I should say, Dermagraft manufacturing, but can you just remind us kind of when you expect that Dermagraft manufacturing up and running? When it can become a material product again for you guys?

Yes, so that's governed by the manufacturing capabilities. So as we've talked about before, that's years out. But on the pricing piece, recognize that we exhausted most of the inventory we had that built in the La Jolla facility at the end of last year in the second -- excuse me, the first quarter. There was almost nothing in the second quarter.

Okay. And I know Steve asked the question on the proposed changes to reimbursement and the structure, I mean, assuming the proposal -- and I know, Gary, you're reluctant to comment on it at this point, but assuming the proposal follow-up to some degree, I mean, how do you think about your ability to navigate more of a capitated payment model under some new reimbursement scheme in this space? And what impact, if again this does go through which we could argue may or may not, but what impact do you think that has on terms of utilization broadly on skin substitutes?

As I said earlier, it's really too early to tell. This is a fairly complicated proposal still a lot of unknowns and it's very difficult to figure out exactly what the final proposal will be. So we really aren't going to speculate on what may or may not happen based on what CMS does, but as we know, as we learn, we'll certainly share what we believe the implications are.

Okay. I'll hop back in queue. Thank you for taking my question.

Thanks, Ryan.

Thank you. One moment for our next question, that will come from the line of Steve Lichtman with Oppenheimer. Please go ahead.

Hi, great, thanks. Just a couple of follow-ups. So, on PuraPly, Gary, once you see some recovery on the amniotic side, what do you see sort of the steady state growth potential for PuraPly off of this higher base in 2022?

Sure. So we do expect and Dave, you can jump in. We do expect PuraPly, the brand long-term, particularly with our additional product offerings to be a low to mid-teen grower. So that's still our expectation for the brand. We really haven't penetrated all the sites of service that we believe the product will do extremely well in, as an example, surgery and even has implications on our burn franchise when we launched TransCyte, so we think long-term, this is still a low to mid-teens grower.

Yes, I completely agree, Gary. I mean, obviously, we haven't talked about '23 yet, but -- and as the product family continues to grow, obviously, the complicating more difficult, but we do believe long-term, the brand continues to perform extraordinarily well and we expect it to be as Gary said, low to mid-teens grower long-term.

Okay, got it. And then, Dave, on the updated guidance, gross margin I think ticked up a bit, but I think you also ticked up OpEx growth. What beyond some of the non-operating things which I guess went up a little bit, what else is driving that increase?

Yes. So we're certainly pleased with gross margin in the second quarter and did have the confidence to bring it up a little bit in the back half for the full-year, so obviously, as I said in the prepared remarks, it really gives us confidence in the long-term trajectory of the gross margin, but the operating expense is a lot of what we're talking about here. We are increasing advisory cost, obviously continue to expand the commercial team in the back half. There was some incremental commissions and expenses in second quarter that was a little bit higher than we had anticipated. So that's some of the increase that you see, including clinical spend, so Gary had mentioned the higher enrollment and those types of things. So a lot of excitement around the continued progress we're making on the BLA.

Got it, Thanks, Dave.

Sure.

Thank you. We are currently showing no remaining questions in the queue at this time. That does conclude our conference for today. Thank you for your participation, you may now disconnect.